Buffett Names Ice Railroad CEO, Rose Executive Chairman

Rose, 54, will be executive chairman of the railroad and
work with managers over the next decade on long-term
organizational planning and public policy, according to a
statement yesterday from Fort Worth, Texas-based BNSF.

Buffett’s 2010 takeover of the business was his largest
acquisition. The 83-year-old Berkshire chairman and CEO
frequently praises results at the operation, which is among the
biggest contributers to earnings. Rose’s leadership at BNSF
could prepare him to take an expanded role at Berkshire and its
more than 80 units spanning the manufacturing, retail, energy
and insurance industries.

“He’s eminently qualified,” Anthony Hatch, an independent
rail analyst, said in a phone interview. “He’s spent time
trying to understand his customers’ businesses that range over
every aspect of the economy. And when you talk about running
Berkshire, it’s a company with that kind of breadth, so he’d be
well positioned.”

The railroad has benefited as new drilling technologies
boosted oil production in states including North Dakota and
Montana. Rose’s operation contributed $989 million to
Berkshire’s third-quarter earnings, compared with $937 million a
year earlier.

“BNSF’s performance has far exceeded the high expectations
I had at the time of Berkshire’s purchase,” Buffett said in the
statement. “The combination of Matt’s and Carl’s talents is the
perfect arrangement for the future.”

34 Years

Ice, 57, the president and chief operating officer, will
become CEO effective Jan. 1, according to the statement. He has
been with BNSF for 34 years, and in 1995 led a team that
orchestrated the merger of Burlington Northern Railroad and
Santa Fe Railway.

“Carl runs a very good ship and it was clear for some time
that he was going to be the next guy,” said Hatch. “That
merger went pretty well, even though it was incredibly
complicated. The integration of two big railroads like this is
very difficult and it’s a big feather to have in your cap.”

Rose began his railroad career as a management trainee at
Missouri Pacific Railroad in 1981, a year before that carrier
merged with Union Pacific Corp., BNSF’s main competitor in the
western U.S.

Obama’s Council

He joined Burlington Northern in 1993, was appointed chief
operations officer in 1997 and succeeded Robert Krebs as CEO in
December 2000. His 13-year tenure leading the company included
building up its business hauling intermodal freight, which can
be carried by train, truck or ship, and then overseeing rapid
growth in crude-by-rail volumes as U.S. petroleum output surged.

Rose was appointed in 2011 to President Barack Obama’s
Council on Jobs and Competitiveness. The committee counts
General Electric Co. CEO Jeffrey Immelt as chairman and is
responsible for recommending policies to revive the American
economy after the worst slump since the Great Depression.

“We previously highlighted Mr. Rose as a potential
successor to Warren Buffett as CEO of Berkshire,” Jay Gelb, an
analyst at Barclays Plc, said in a note to investors. “With the
BNSF succession plan now firmly in place, we would still view
Mr. Rose as a likely candidate.”

The new assignments echo a transition in 2008 when Gregory Abel was promoted to CEO of Berkshire’s MidAmerican Energy
Holdings Co., replacing David Sokol, who stayed on as chairman.
The switch allowed Sokol to take on new responsibilities, such
as scouting for acquisitions.

Stepping Back?

Investors will be better able to draw conclusions about
Rose after his new role is more clearly defined, said Richard Cook, co-founder of Cook & Bynum Capital Management LLC, which
oversees about $300 million, including shares of Berkshire.

“Is he really stepping back and effecting a transition at
Burlington Northern,” Cook said. “Or is he stepping up and
taking more responsibility?”

BNSF didn’t make Rose or Ice available for comment.

Buffett wrote in 2010 that he and Vice Chairman Charles Munger viewed Rose’s role as a benefit of buying the railroad.

“Charlie and I decided that the disadvantage of paying 30
percent of the price through stock was offset by the opportunity
the acquisition gave us to deploy $22 billion of cash in a
business we understood and liked for the long term,” Buffett
said in a letter to shareholders. “It has the additional virtue
of being run by Matt Rose, whom we trust and admire. We also
like the prospect of investing additional billions over the
years at reasonable rates of return.”

The railroad had $2.8 billion of capital expenditures in
the first nine months of this year, according to a Berkshire
regulatory filing. The plan included spending on the rail
network of about 32,500 miles (52,300 kilometers) and the
purchase of locomotive and freight cars.